Partnership Tax Reforms Prove Unpopular
HMRC have recently announced several reforms to the way Limited Liability Partnerships are taxed. The latest plans, however, have proved unpopular with advisors in the professional service industry.
The plans in question are aimed at tackling two issues. Chiefly, they target businesses who disguise junior employees as partners for tax benefit. They also aim at blocking certain practices that involve tactical allocation of profits and losses to gain income tax or capital gains relief.
Of just over 100 professional services advisors surveyed, of which nearly a quarter were from the accountancy trade, the overwhelming majority felt the plans were a bad idea. 82% believed that the HMRC’s proposed tests for determining self-employment were not the most effective way, and 77% felt that these tests were unfair or overly complicated. 83% also believed that implementing these plans would make LLPs less attractive.
There has, however, been a lack of agreement on a viable alternative. Some respondents to the survey felt that the current system was fine, but many did not. If the current plans do not go ahead, it is unclear what will replace them.